AppFolio(APPF) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Highlights AppFolio reported strong Q2 2025 financial results, driven by AI-native platform adoption, with significant revenue growth and improved non-GAAP operating income Q2 2025 Performance Overview AppFolio, Inc. announced strong financial results for the second quarter ended June 30, 2025, driven by the adoption of its AI-native platform and Realm-X through premium tiers and value-added services - AppFolio announced its financial results for the second quarter ended June 30, 2025, highlighting strong revenue growth driven by Realm-X adoption through premium tiers and value-added services[1] CEO Commentary CEO Shane Trigg emphasized the company's market success and the tangible performance benefits customers are experiencing from adopting AppFolio's central, AI-native platform, with 96% of customers utilizing AI-powered solutions - CEO Shane Trigg stated that the second quarter results reflect continued market success, with 96% of customers using one or more AI-powered solutions and seeing tangible performance benefits from the AI-native platform[2] Key Financial Highlights (Q2 2025) AppFolio reported significant year-over-year growth in revenue and units under management for Q2 2025, alongside improved non-GAAP operating income, demonstrating strong operational efficiency Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | YoY Change | Notes | | :-------------------------------- | :------ | :------ | :--------- | :---- | | Revenue (Millions USD) | $236 | - | 19% growth | | | Total Units Under Management (Millions) | 8.9 | - | 6% growth | | | GAAP Operating Income (Millions USD) | $41 | $36 | 13.9% growth | 17.2% of revenue (Q2 2025) vs 18.3% (Q2 2024) | | Non-GAAP Operating Income (Millions USD) | $62 | $51 | 21.6% growth | 26.2% of revenue (Q2 2025) vs 26.0% (Q2 2024) | | Net Cash Provided by Operating Activities (Millions USD) | $53 | $51 | 3.9% growth | 22.3% of revenue (Q2 2025) vs 25.8% (Q2 2024) | Financial Outlook AppFolio provides its fiscal year 2025 financial guidance, projecting revenue and non-GAAP operating margin targets Fiscal Year 2025 Guidance AppFolio provided its financial outlook for the full fiscal year 2025, projecting revenue within a specific range and a target for non-GAAP operating margin Fiscal Year 2025 Financial Outlook | Metric | Guidance | | :-------------------------------- | :-------------------- | | Full Year Revenue (Millions USD) | $935 to $945 | | Full Year Non-GAAP Operating Margin | 24.5% to 26.5% of revenue | | Diluted Weighted Average Shares Outstanding (Millions) | Approximately 37 | Corporate & Legal Information This section provides an overview of AppFolio's corporate identity, investor relations, and forward-looking statement disclaimers About AppFolio AppFolio is recognized as a technology leader in the real estate industry, offering an innovative platform and partnership to enhance community connections, operational efficiency, and business growth for its customers - AppFolio is a technology leader powering the future of the real estate industry, providing an innovative platform and trusted partnership to enable customers to connect communities, increase operational efficiency, and grow their business[6] Investor Relations & Conference Call The company provided details for its Q2 2025 earnings conference call and highlighted its investor relations website as a primary channel for disclosing material nonpublic information - AppFolio hosted a conference call on July 31, 2025, at 2:00 p.m. PT / 5:00 p.m. ET to discuss Q2 financial results, with a live webcast and replay available[3] - The company uses its Investor Relations website (https://ir.appfolioinc.com/) for disclosing material nonpublic information and complying with Regulation FD[5] Forward-Looking Statements The report includes a standard disclaimer regarding forward-looking statements, emphasizing that future results may differ due to various known and unknown risks and uncertainties, and the company does not undertake to update these statements - Forward-looking statements are subject to considerable risks and uncertainties that may cause actual results to differ materially from those expressed or implied[7][8] - These statements relate to future operating results, financial position, fiscal year 2025 outlook, anticipated expenses, business opportunities, and the impact of strategic actions and AI-powered solutions[7] - The company undertakes no obligation to update any forward-looking statements, except as required by law[10] Condensed Consolidated Financial Statements This section presents AppFolio's condensed consolidated balance sheets, statements of operations, and cash flows for the reported periods Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2025, shows a decrease in total assets compared to December 31, 2024, primarily due to a reduction in investment securities, while total liabilities saw a slight increase Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Assets | $567,403 | $626,678 | | Total Liabilities | $111,757 | $107,388 | | Stockholders' Equity | $455,646 | $519,290 | | Cash and Cash Equivalents | $73,478 | $42,504 | | Investment Securities—Current | $54,088 | $235,745 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, AppFolio reported a significant increase in revenue and net income compared to the prior year, reflecting strong top-line growth and improved profitability Condensed Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $235,575 | $197,375 | $453,277 | $384,805 | | Income from Operations | $40,512 | $36,028 | $74,295 | $70,118 | | Net Income | $35,980 | $29,665 | $67,363 | $68,328 | | Diluted EPS | $0.99 | $0.81 | $1.85 | $1.86 | Revenue Breakdown Revenue growth for Q2 2025 was primarily driven by Value Added Services, which continued to be the largest contributor, alongside solid growth in Core Solutions Revenue Categories (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Core Solutions | $52,473 | $44,024 | $101,986 | $86,944 | | Value Added Services | $180,145 | $151,620 | $344,851 | $293,951 | | Other | $2,957 | $1,731 | $6,440 | $3,910 | | Total Revenue | $235,575 | $197,375 | $453,277 | $384,805 | Stock-Based Compensation in Operations Stock-based compensation expense increased across all operating expense categories for both the three and six months ended June 30, 2025, with research and product development showing the largest absolute increase Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of Revenue | $1,419 | $1,175 | $2,706 | $2,135 | | Sales and Marketing | $3,045 | $1,703 | $5,893 | $3,213 | | Research and Product Development | $8,176 | $6,472 | $15,107 | $12,154 | | General and Administrative | $5,659 | $5,444 | $10,964 | $10,766 | | Total Stock-Based Compensation Expense | $18,299 | $14,794 | $34,670 | $28,268 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities remained strong in Q2 2025, while investing activities shifted to a net cash inflow, primarily due to proceeds from sales and maturities of investments. Financing activities resulted in a significant net cash outflow, largely due to common stock purchases Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $52,643 | $50,869 | $91,108 | $93,823 | | Net Cash Used in Investing Activities | $23,765 (inflow) | $(38,034) (outflow) | $104,559 (inflow) | $(61,071) (outflow) | | Net Cash Used in Financing Activities | $(59,863) | $(12,410) | $(164,693) | $(22,622) | | Net Increase in Cash, Cash Equivalents and Restricted Cash | $16,545 | $425 | $30,974 | $10,130 | | Cash, Cash Equivalents and Restricted Cash, End of Period | $73,728 | $59,889 | $73,728 | $59,889 | Non-GAAP Financial Measures This section explains AppFolio's use of non-GAAP financial measures, their reconciliation to GAAP, and the rationale for their presentation Introduction to Non-GAAP Measures AppFolio utilizes non-GAAP financial measures to supplement GAAP results, providing additional insights into operating performance, but notes that it cannot provide GAAP equivalent guidance for certain forward-looking non-GAAP metrics due to the unpredictable nature of some excluded items - AppFolio uses non-GAAP financial measures in addition to GAAP, including non-GAAP income from operations, costs, operating margin, net income, and EPS, which exclude certain non-cash or non-recurring items[6] - The company is unable to provide GAAP equivalent guidance for non-GAAP operating margin on a forward-looking basis due to the uncertainty and unpredictability of items like stock-based compensation expense[6] Reconciliation from GAAP to Non-GAAP Results Detailed reconciliations are provided to bridge GAAP financial measures to their non-GAAP counterparts, primarily by adjusting for stock-based compensation expense and amortization of purchased intangibles, offering a clearer view of core operational performance Operating Expenses Reconciliation Non-GAAP operating expenses, excluding stock-based compensation, show a lower percentage of revenue compared to GAAP figures, indicating improved efficiency when non-cash expenses are removed Non-GAAP Operating Expenses Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2025 (GAAP) | Three Months Ended June 30, 2025 (Non-GAAP) | Three Months Ended June 30, 2024 (GAAP) | Three Months Ended June 30, 2024 (Non-GAAP) | | :------------------------------------------ | :-------------------------------------- | :---------------------------------------- | :-------------------------------------- | :---------------------------------------- | | Cost of Revenue (excl. D&A) | $83,827 (36% of revenue) | $82,408 (35% of revenue) | $69,601 (35% of revenue) | $68,426 (35% of revenue) | | Sales and Marketing | $36,776 (16% of revenue) | $33,731 (14% of revenue) | $27,300 (14% of revenue) | $25,597 (13% of revenue) | | Research and Product Development | $46,674 (20% of revenue) | $38,498 (16% of revenue) | $39,522 (20% of revenue) | $33,050 (17% of revenue) | | General and Administrative | $21,936 (9% of revenue) | $16,277 (7% of revenue) | $20,254 (10% of revenue) | $14,810 (8% of revenue) | | Depreciation and Amortization | $5,850 (2% of revenue) | $3,051 (1% of revenue) | $4,670 (2% of revenue) | $4,081 (2% of revenue) | Income from Operations and Net Income Reconciliation Non-GAAP income from operations and net income significantly exceed their GAAP equivalents, primarily due to the exclusion of stock-based compensation and amortization of purchased intangibles, resulting in higher non-GAAP operating margins and EPS Non-GAAP Income from Operations and Net Income Reconciliation (in thousands, except per share) | Metric | Three Months Ended June 30, 2025 (GAAP) | Three Months Ended June 30, 2025 (Non-GAAP) | Three Months Ended June 30, 2024 (GAAP) | Three Months Ended June 30, 2024 (Non-GAAP) | | :------------------------------------------ | :-------------------------------------- | :---------------------------------------- | :-------------------------------------- | :---------------------------------------- | | Income from Operations | $40,512 | $61,610 | $36,028 | $51,411 | | Operating Margin | 17.2% | 26.2% | 18.3% | 26.0% | | Net Income | $35,980 | $49,821 | $29,665 | $41,165 | | Net Income Per Share, Basic | $1.00 | $1.39 | $0.82 | $1.14 | | Net Income Per Share, Diluted | $0.99 | $1.38 | $0.81 | $1.12 | Statement Regarding the Use of Non-GAAP Financial Measures AppFolio uses non-GAAP measures internally for performance assessment and budgeting, and externally to provide investors with supplemental information, specifically excluding stock-based compensation, amortization of purchased intangibles, and related income tax effects, which are considered non-operational or non-recurring - Non-GAAP financial measures are used internally to assess and compare operating results, for budgeting, and to evaluate financial performance, and are believed to provide useful supplemental information to investors[21] - Excluded items include stock-based compensation expense (for attracting/retaining employees, not operational performance), amortization of purchased intangibles (arising from pre-acquisition activities), and the income tax effect of these adjustments (using a fixed long-term projected tax rate)[21][23] - Non-GAAP measures may not be directly comparable to other companies and should not be considered in isolation from GAAP financial information due to potential material impact of excluded expenses[22]